New Mis-selling Scandal to hit Barclays, HSBC, RBS and Lloyds

UK banks Barlcays, HSBC, RBS ad Lloyds are set to be embroiled in controversy once again with fresh claims of mis-selling.

UK bank shares took a tumble when the Financial Ombudsman earlier last week said they had received up to 4,000 complaints (a week) about mis-sold loan insurance. The overall figure, however, is thought to be much larger at around 2 million UK customers.

UK customers believe they have been mis-sold insurance to cover events such as credit card fraud. The Financial Conduct Authority said 11 lenders and card issuers had voluntarily agreed to compensate customers including Barclays, Lloyds Bank and RBS.

Lloyds has so far set aside £11.3bn for compensation for the mis-selling of loan insurance, more than any other bank. Lloyds set aside nearly £10bn worth of PPI compensation — more than any of the “Big Four”. Barclays, Royal Bank of Scotland and HSBC have also set aside billions of pounds of compensation, which will have a knock-on effect for their balance sheets.

Royal Bank of Scotland, as well as being rocked by this new loan mis-selling scandal, has confessed to misleading some small business customers as part of the £2.3bn of loans the bank has made under the Enterprise Finance Guarantee (EFG) scheme. RBS, which is 80%-owned by the taxpayer, has been the biggest user of the EFG scheme, which was set up in 2009 to encourage additional lending to small and medium-sized enterprises.

Finally to HSBC, whose share price has been under pressure of late, not helped by broker Investec who lowered its rating for the stock from “Add” to “Hold”, saying that the bank’s upcoming fourth-quarter results could disappoint. The broker said that a weak showing from the bank on February 23rd will “trigger downgrades”, as it lowered its target price for the shares from 650p to 630p.